Obamacare Is Now on the Ropes

Obamacare Is Now on the Ropes

The decision of Judge Henry Hudson in Virginia v. Sebelius is no bird of passage that will easily be pushed aside as the case winds its way up to its inevitable disposition in the United States Supreme Court. The United States gave the case its best shot, and it is not likely that it will come up with a new set of arguments that will strengthen its hand in subsequent litigation.

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The key successful move for Virginia was that it found a way to sidestep the well-known 1942 decision of the Supreme Court in Wickard v. Filburn, which held in effect that the power to regulate commerce among the several states extended to decisions of farmers to feed their own grain to their own cows. Wickard does not pass the laugh test if the issue is whether it bears any fidelity to the original constitutional design. It was put into place for the rather ignoble purpose of making sure that the federally sponsored cartel arrangements for agriculture could be properly administered.

At this point, no district court judge would dare turn his back on the ignoble and unprincipled decision in Wickard. But Virginia did not ask for radical therapy. It rather insisted that “all” Wickard stands for is the proposition that if a farmer decides to grow wheat, he cannot feed it to his own cows if a law of Congress says otherwise. It does not say that the farmer must grow wheat in order that the federal government will have something to regulate.

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It is just that line that controls this case. The opponents of the individual mandate say that they do not have to purchase insurance against their will. The federal government may regulate how people participate in the market, but it cannot make them participate in the market. For if it could be done in this case, it could be done in all others.

In making this position, the district court rejected the view that the individual mandate was a necessary and proper offset to the congressional decision to require all insurers to take customers without regard to their preexisting conditions. In the government’s view, the two issues are the opposite side of the same coin. If the system is going to give some individuals a subsidy, it must find a way to tax someone else to provide that subsidy. Hence the individual mandate.

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Notwithstanding the unanimous support of the cross subsidy by the political classes, their use is not a sound idea. Cross subsidies are always unstable because they lead to overconsumption by the privileged class and massive resistance by the losers. In a real sense, a revitalized takings-clause argument would condemn these as transfers of wealth from A to B, without just cause.

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But here no one in the political elites of either party wants to challenge the correctness of the subsidy. So the argument now has to be that the only way to fund this is out of general revenues, not out of selective charges against those who do not wish to join in the system. As a matter of political theory, there is no clear rule that says if X group is entitled to the subsidy, we can somehow identify the Y group who is duty bound to pay it. So as a normative matter, it is hard to explain why the individual mandate has to be the flip side of the subsidy when general taxes are still available.

As a political matter, however, the unhappiness with the cross subsidy could prove the undoing of Obamacare. The only way to get general revenues for this proposal is to get the next Congress to go along, which will not happen now that there is a Republican House of Representatives. So a bill that is already in hock is now ruinously so, which will only increase the political unease.

The government finds itself here in a real pickle. Virginia has drawn a clear line that accounts for all the existing cases, so that no precedent has to be overruled to strike down this legislation. On the other hand, to uphold it invites the government to force me to buy everything from exercise machines to bicycles, because there is always some good that the coercive use of state authority can advance. The ironic point is that this is not a commerce-clause argument as such, for in my view any state statute would be subject to the same objection even though the state has plenary police powers.

So how does it stand? If you know which way Justice Kennedy will vote, you have a pretty good shot of getting the final outcome. But if one plays the odds, this is a 15-round fight. As of today, Obamacare is losing on rounds.

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